Getting paid half my salary in the US - pitfalls?

excel105

Hi - I work for a UK based private company, and have been setting up a 100% owned subsidiary of the business in the US spending a month here and a month over there. I am an employee of the UK business, and am paid in sterling out of the UK.

However, I am now about to hit 183 days in the US, which as we undertand it means that Uncle Sam will want to tax the income that I have earned in the UK (and already paid UK tax on).

I believe the only way around this is to get paid 50% here and 50% in the US, and get the tax authorities to agree on a 50:50 split. Whilst this is inconvenient as all my outgoings are in the UK, I think it is workable and I should be able to transfer the dollars back to my UK bank account.

My main issue and question relates to my credit score; If I am only to be paid half my salary in the UK, I assume this will affect my credit worthiness? Is there any way around this - particularly thinking if I wish to re-mortgage my home at some point for a better deal?

Any advice or suggestions of speciallists in the field who I could speak to greatfully recieved!

Richard

fengirl_2

I am not sure this would work in the UK. You are resident here and need to pay tax on your worldwide income, with credit given for any US tax paid. It therefore does not matter for Uk tax purposes where you are paid.

excel105

Hi Fengirl - thanks for the reply. However, I think the issue is that once I have been in the US for 183 days, they count me as a resident for tax purposes.

DCodd

Hi - i think what fengirl meant was that if you get all your income paid in the UK you can offset any tax paid in the US against tax owed in the UK.

excel105

OK thanks.

Any idea about my issue with my credit score in the UK as the result of effectively being paid less here? Are the credit reference agencies able to see my US earnmings?

DCodd

Are you going to be paid via the US company then? I thought that you were employed by the UK company?

if you are paid by the UK company into a UK bank then all your earnings will be here in the UK and you may have to pay US tax on 50% then claim that back to offset against your UK tax. Your earnings have to be taxed at source so unless you are employed by BOTH the UK and US companies I see no problem?


If you are employed by both Companies then TBH I am not sure but knowing someone who splits their working week between the UK and Germany it does not cause a problem. They are employed by the UK registered part of the company and are paid by that company and pay their tax in the UK even though they spend half their time working for the German Branch. But that is Europe and not the US.

fengirl - any ideas????

excel105

Our accountants seem to believe that I should be paid 50% by the UK and 50% by the US businesses, and thus pay the relevant tax in each country. This is why I forsee the issue.

What you are saying is that perhaps I continue to be paid as I am (i.e. 100% from the UK), and then pay tax on 50% of this to the US, claiming back this amount from the UK revenue?

DCodd

Seems to be the most logical way to me, but hopefully fengirl will highlight any issues with this.

fengirl_2

You need a US tax expert to advise you really. All I can do is reiterate that for UK tax purposes it doesnt matter where you are paid - as a UK resident you pay UK tax on all your income and get credit for any overseas tax paid (subject to double taxation agreements).

excel105

Thanks all for the advice.

If any US tax speciallist would like to offer their services, please contact me directly.

Richard

canadiangirl78

Hello

I am not a US tax specialist but I will say that if US taxes are due then once you are set up to pay US tax through withholding (Like PAYE) you can apply to HMRC for 'net of foreign tax credit relief'. Essentially they will reduce your UK PAYE by the foreign PAYE being paid. You can google this on HMRC's website for further info- it is also called an Appendix 5 agreement if that helps.

It is likely that your accountant is suggesting that you be paid partly in each country so that each payroll has something to withhold tax from- as fengirl says tax will still be due in both locations, and on your total employment income in the UK as you are resident in the UK.

One thing to bear in mind is that depending on where you are in the US they often insist on withholding being operated far before the 183 day threshhold- so you should definitely get some US advice.

Hope this helps!